- Company expects decline in 2025 sales
- Weak end markets
- Tariff uncertainties weigh
Advanced materials and engineering group Morgan Advanced Materials (MGAM) dropped 20% on Friday (28 Feb) after the FTSE 250 firm forecast a decline in 2025 organic revenue amid weak end demand and tariff uncertainties.
The shares made new 12-month lows, slipping under 200p to leave them languishing 50% below the highs achieved in April 2021.
WEAKENING END MARKETS
The company reported a 3.7% increase in constant currency organic revenue to £1.1 billion for the year to 31 December but noted challenging markets in the second half.
‘We saw a significant weakening of end markets during the year, with declining and low order levels in European and Chinese industrial markets and slowing in those same markets in the USA,’ the company said.
A lower growth rate in global electrical vehicle sales impacted demand for the group’s products used in Silicon carbide power semiconductor production.
In particular, the US electrical vehicle market has been grappling with potential policy changes driven by President Trump’s plan to cut tax credits for electric vehicles.
Morgan Advanced Materials also said it continues to monitor the threat from potential tariffs and, if necessary, will consider alternative manufacturing locations to mitigate any impacts.
SOFT GUIDANCE
The uncertain outlook has prompted Morgan Advanced Materials to assume no second half recovery and it is now forecasting a mid-single digit percentage decline in 2025 organic revenue.
The firm has accelerated its simplification plan which, it believes, will underpin an adjusted 12.5% operating margin on sales for the full year.
Investment in semiconductor capacity has been scaled back to circa £60 million from a prior forecast of £100 million and is expected to deliver incremental revenue and adjusted operating profit of £40 million and £12 million, respectively in 2027.
CEO Pete Raby commented: ‘We have delivered robust organic constant currency revenue growth against a backdrop of increasingly challenging end-markets, with good progress made in our business simplification and efficiency initiatives, continuing our track record of self-help.
‘We remain focused on delivering against our strategic initiatives and expect a return to a 12.5% adjusted operating profit margin during 2025,’ added Raby.
